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Insurance Carrier: Great-west Life Assurance Company
State: Texas

Consumer Complaint:

We want to take paid up insurance on two policies: Policy on son was issued 12-20-84 at son's age 23 for $50,000. Premium has been $346 base coverage per year. Additional insurance purchased is $21,229. Paid up ins will be $54,245. Policy on daughter was issued 12-20-84 at daughter's age 26 for $50,000. Premium has been $368.50 base coverage per year. Additional insurance purchased is $22,365. Paid up ins will be $70,990. Why is there $16,745 difference in the paid up value of the 2 policies? We want to take paid up insurance on both policies. Son's paid up ins will be $54,245. Daughter's paid up ins will be $70,990. Thank you very much for replying so promptly to my question. I will consider your information and then reach a decision on the best way to handle the policies. The "children" are in excellent health, non-smokers. These are whole life policies and have a current cash value of only $7163 on the son and $8403 on the daughter. Our intent at the time of purchase was to provide life insurance. Now our intent is to avoid the annual payments of $400 on the son and $425 on the daughter. At the time we purchased the policies, it was projected that dividends would start paying the premiums in about 14 years. We chose the option of purchasing additional insurance.

Insurance Expert Answer:

First, although you did not ask, before making ANY selection I urge you to speak with several qualified insurance agents but beware that they will want to have you buy something from them.

I gather you want to get out of the expense of paying premium, and I don't blame you. But turning an existing policy into what is only a promise to pay $54k or $70k at their deaths (which, given normal life expectancies, would be at least 25 years from now).

Depending on the health and smoker status of the children it may be that they could get far more death benefit with the cash value than Great West is offering as paid up. Alternatively, if the children are in very poor health, it may be to their advantage to keep on paying or having them pay.

As another possibility, taking the cash out, and having them buy new 10 or 20 year term coverage may be the best choice.

Life insurance rates have declined dramatically since 1984, and 10 year term is very inexpensive if the person is healthy.

As to why the paid up is higher on your daughter than your son, that's simple. Women live longer than men -- an average of 7 years or so I recall -- so at all ages the rates the women pay are lower than what a male would pay. The lower rates translate into higher death benefits. I understand your concern. I did a very quick online search to see what a healthy male born in 1960 would pay per year for 10 and 20 year "instant issue" term. (The price quoted is typically significantly higher than what someone who had even basic underwriting would pay.) The cost 10 of year term would be less than $400 per year; 15 year term would be $485 per year while 20 year term is $624 per year -- AND THAT'S FOR $100,000 in coverage. That's far more coverage than the paid up life would provide, and if you cashed out the policy on your son, the cash value -- without interest earnings -- would pay for the premium on 15 year term until he's 65.

I never have been a licensed insurance agent so I am not trying to influence you, and no one knows what the future will hold. Personally, there often is no real need for life insurance, unless one has dependents, when one is north of 65. AND if he shopped for term insurance the rate would be far lower assuming he passed underwriting.